In an aggressive attempt to create the largest gold producing company in the world, Barrick Gold has offered rival Newmont Mining US$18 billion to buy it out. The hostile all-stock offer resulted in an all-out war of words between the two companies, with Barrick defending its actions by saying that the deal would actually be beneficial to both parties.
According to Barrick CEO Mark Bristow, the offer that was put on the table was a "logical" one, especially during this time of rising costs and depleting resources. Both companies have tried to acquire competitors in the past, with Barrick recently acquiring Africa-focused Randgold Resources for US$6.1 billion.
Aside from its hostile bid for the company, Barrick also discouraged Newmont with pushing through its planned US$10 billion purchase of the Canadian mining firm, Goldcorp. The offer apparently contained a clause that required Newmont to scrap its planned all-stock purchase of Goldcorp. The planned acquisition is already underway and is due to be closed in the second quarter of 2019. If Newmont does decide to back out of the deal now, it would have to pay a US$650 million cancellation penalty to Goldcorp.
In response to the hostile bid, Newmont executives mentioned that they didn't want to accept Barrick's offer as the company apparently had a "poor track record" of delivering to its shareholders. The company mentioned that they had already reviewed Barrick's offer and reiterated that their planned purchase of Goldcorp actually made "more business sense."
As part the Newmont's official statement regarding the offer, the US-based company instead proposed that both their companies initiate a joint venture in Nevada to save on cost. Both companies currently hold massive deposits in the area and a combined effort to excavate the despots could result in massive savings for both parties. Barrick currently holds most of the high-grade gold reserves in Nevada. However, Newmont still outclasses Barrick when it comes to processing capacity and overall infrastructure.
According to Barrick's estimates, the combination of their mines in Nevada could result in annual pre-tax synergies of around US$750 million in the first five years. Massive savings could also be generated by closing down Newmont's offices in Denver. Several redundant positions could also be removed, which would further save money by cutting staff.
Barrick's hostile offer is the latest bid by the company to acquire its fiercest rival. Both companies had previously flirted with the notion of a merger in the past. However, negotiations often broke down mostly because of personality clashes between the respective company's CEOs. A tie-up deal in 2014 reportedly collapsed when both CEOs couldn't see eye to eye on different issues.
